Are You Liable for Your Employee’s Sexual Misconduct?

It is tempting to turn away from the steady drumbeat of disturbing news regarding sexual harassment. Because this news is so unpleasant, it can be alluring to convince yourself that sexual harassment couldn’t (and doesn’t) take place on your construction sites or in your office.

However, you would be doing so at your own peril. According to the University of Minnesota Human Rights Library, “In the United States, employers are responsible for providing their employees with a work environment that does not discriminate and is free of harassment. Employers are, therefore, required by law to take steps to prevent and deal with harassment in the workplace. If the employer has not taken all reasonable steps to prevent and deal with harassment in the workplace, the employer may be liable for any harassment which does occur, even if unaware that the harassment was taking place.”

Undoubtedly, there are workplaces free of sexual harassment. However, statistics indicate that the risk is present and real. Specialty insurer Hiscox recently released a study showing that more than 35 percent of employees in the U.S. feel they’ve experienced some form of workplace harassment.

The number rises to 41 percent among women. Of those individuals who reported the incident to management, 37 percent did not feel it was handled properly. For women, this percentage rises to 49 percent.

Proper sexual harassment risk mitigation efforts should begin with education. Each company must inform its employees, providing them with the opportunity to grasp a true understanding of what sexual harassment is, what it looks and feels like, and what steps to take if it occurs—they only way to help prevent sexual harassment before there is personal harm and disruption to your workplace.

Training should be put into place by experienced human resources professionals; this is no place for amateurs. The nature of sexual harassment should be the focus of educational efforts at your company. Trained human resources professionals should be engaged to help answer these questions:  

• When does an affectionate gesture cross into harassment territory?
• Is it permissible to place your hand on a colleague’s shoulder?
• Is it permissible to place your hand on a colleague’s back?
• Is it harassment to invite a colleague to the hotel bar for a drink?
• Do the personal dynamics change if the colleague is your subordinate?
• Would it be advisable to include a third party?

Because most human interactions are subjective, it is always best to err on the side of caution when answering these questions for your own company policies.

There is no question: Innocent actions can sometimes appear otherwise to the recipient. It happens all the time, particularly across generations. While a friendly pat on the back or hands placed on another person’s shoulders may have passed without comment or offense 30 years ago, this is often not the case today. Proper sexual harassment education can rescue an older party from embarrassment, a younger party from distress, and the firm from reputational damage and an expensive lawsuit.

Combine education with documentation outlining your firm’s code of conduct. If a manager or employee diverges from the code of conduct, documentation will help shield your company from risk.

Proper channels of communication should be clearly outlined in the event of an incident. Forty percent of individuals experiencing harassment do not report it to company management or law enforcement, according to the Hiscox study. To prevent this from happening in your company, individuals should feel protected when reporting an incident. The door to human resources or management should be open to any individual wishing to report sexual harassment and closed when the complaint is being lodged.

Employees must feel certain their standing in the company, both presently and in the future, will not be compromised after reporting an instance of harassment. This message must be clearly communicated in word, on paper, in training and in practice.

Charges of sexual harassment and the underreporting/overlooking of instances are increasingly derailing otherwise effective U.S. companies. The reputations of large, well-capitalized firms, including Bank of America, Ford Motor Company, Uber, Fox News, CBS and NBC have been damaged. In many cases, repair work continues for years.

As such, on January 1, 2019, a Delaware law will go into effect requiring specific training on sexual harassment for all employers with 50 or more employees. California law requires 2 hours of sexual harassment training every 2 years for companies with 50 or more employees. This can serve as a good rule of thumb for companies operating in all states, and we can expect more states to follow this lead in the near future. 

MarketStance, a research firm tracking insurance trends, notes that only 3 percent of companies with fewer than 50 employees report carrying coverage for sexual harassment. Since this is a time when there can be zero tolerance for misconduct or margin for error in carrying out sexual harassment charges, this number percentage is ideally 100.

Since risk from workplace sexual harassment will vary according to each individual company’s potential loss exposure, you should speak with your professional risk manager and trusted insurance broker about putting the proper employee practice liability insurance (EPLI) coverages in place to transfer the risk and exposure of an allegation. EPLI coverages typically include claims made by employees alleging discrimination, wrongful termination and harassment. This policy will also help fund communication efforts to win back your firm’s good reputation.